Bank of New York Mellon Corp. has cinched a $2.31 billion deal to acquire back-office operations of PNC Financial Services Group Inc., months after PNC put the business up for sale.
The operations, PNC Global Investment Servicing, provides back-office processing for financial advisers, fund managers and brokers. Talks between PNC and Bank of New York Mellon were reported on Friday by The Wall Street Journal.
Bank of New York Mellon said Tuesday the purchase will provide "the potential for significant revenue and expense synergies."
The purchase price includes the purchase of $1.57 billion of stock and repayment of intercompany debt from PNC. Bank of New York Mellon plans to raise approximately $800 million in equity as part of the transaction. The all-cash acquisition, which will boost Bank of New York Mellon's profit in the first year, is expected to close in the third quarter.
Bank of New York Mellon said the deal will make it the No. 2 provider in fund accounting, administration and transfer agency while adding $855 billion in assets under administration--the company currently had $22.3 trillion as of Dec. 31. It will also move the company into the No. 3 spot in alternative-fund assets under administration as Bank of New York Mellon doubles its European asset base.
The PNC unit currently for sale employs 4,450 employees, representing 8% of PNC's 55,820-person work force. It earned $63 million in profits for 2009, the smallest of any PNC business segment, down from $122 million in 2008.
PNC has been eager to do a transaction to help raise money to pay down $7.6 billion in government Troubled Asset Relief Program funds, said one of these people. Chief Executive James Rohr has made TARP repayment a goal for 2010.
PNC outperformed many regional banks during the financial crisis, buying ailing rival National City Corp. in a 2008 deal that elevated the Pittsburgh-based institution to the nation's fifth-largest bank by assets. It took the TARP funds to assist with the National City deal.
Unlike many of its TARP-aided rivals, though, PNC has taken a slower approach to returning the government money, saying that it made sense to be cautious in case the economy took longer to recover.